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Before the Call: Gauging Genentech

Quarter, schmorter. What's the big picture look like?

Psst! Hey, buddy, wanna buy a quality biotech for a fair price? According to Yahoo! Finance, one of the best in the business can be had today for a PEG ratio of precisely 1.0 -- the dictionary definition of "fairly priced." Of course, you can expect that to change on Wednesday, just as soon as Q2 2007 earnings are released, reshuffling the earnings numbers, and almost certainly the stock price.

After the news comes out, we'll have time aplenty to dissect it. But in these few hours before we begin obsessing over Genentech's short-term progress, let's take a moment to review what investors think about it as a long-term investment. Our tool in this endeavor: Motley Fool CAPS, where we poll more than 50,000 investors for their views on well over 4,000 companies, Genentech among them. Here's what Fools have to say about it.

Up or down?More than 900 investors have submitted ratings on Genentech. Their verdict: It's gene-riffic! Slightly more than 90% of CAPS investors who've rated the stock expect Genentech to outperform the market. That's enough to earn Genentech three stars out of a possible five on CAPS.

Among major drug manufacturers, Genentech has recently moved to the middle of the pack:

Wall Street vs. Main StreetWall Street is more bullish (bullisher?) on Genentech. All 13 of the analysts we track expect it to outperform the market. Pretty surprising, considering that over the past 52 weeks, the stock has underperformed the S&P 500 by 24 percentage points.

Bull pitchIts lack of upward movement notwithstanding, Foolish All-Star investors seem willing to wait around for this stock. Says one investor: "Cash Flow has been growing at a solid rate, but the stock is flat for almost two years. At some point, the stock price will rise with cash flow; I think that will happen soon."

Writes another: "This company grows in spurts, based upon the release of new products. While it has underperformed the S&P over the past 2 years, my guess is that they will again come up w/ something to boost the stock to the next level."

A third exclaims, "Kramer [sic] thinks this stock will hit 140, conservatively 104 within the next year."

Hmm. That would make for almost a double. Maybe Jim Cramer will make "All-Star" yet!

Bear pitchBears find numerous reasons to hate Genentech, ranging from valuation ("priced for perfection"), to competition ("Competition is heating up as Nexavar, Sutent, and other targeted drugs jump into the solid tumor market"), to management ("Insiders don't want this stock. So why should we?"). That last comment is particularly telling. A glance at Yahoo! Finance reveals that insiders have dumped almost all their shares over the last six months -- 96.2%. Scary!

Who said that?To learn the identities of the wise Fools who penned these words, and to explore the plethora of additional financial data we've put together on the company, just click here.

And for a sampling of big-name biotechs that Fool staffers prefer more than Genentech, don't forget to claim a free, 30-day all-access pass to Motley Fool Rule Breakers.

Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 977 out of more than 59,000 investors.

Author

I like things that go "boom." Sonic or otherwise, that means I tend to gravitate towards defense and aerospace stocks. But to tell the truth, over the course of a dozen years writing for The Motley Fool, I have covered -- and continue to cover -- everything from retailers to consumer goods stocks, and from tech to banks to insurers as well. Follow me on Twitter or Facebook for the most important developments in defense & aerospace news, and other great stories besides.